The error of Mr. Papakonstantinou

"Investors, speculating on a default of Greece will lose their shirts", warns the Greece finance minister Giorgos Papakonstantinou last weekend. He thought that this will stop any speculative behavior againts Greece government bonds. What an error!

This kind of wording does not show the humility investors want to see from Greece, enforcing the belief, that this and any future government of Greece will be able and willing to make structural reforms and to pay down debt according to plan. Remember the speculation of George Soros against the pound. If the Bank of England could not weather market cycles.

Even if the IMF and the EU give support as expected, the real question will be, if Greece is able to refinance any debt in 2011, 2012 or beyond. At this moment, politicians in Germany and other EU member states may fear a Greece default more than a "bottomless pit". That may change if Greece is unable to change its financial culture. If you try to change your own behavior, for example to stop smoking, than you know how difficult it is. It is no wonder that the Greece public will resist. Expect the search for culprits or scapegoats as a step towards understanding.

The proposed IMF and EU bailout package is an easy solution and therefore not enough to change behavior in Greece in a sustainable way. So dont expect Greece government bonds to show a huge recovery even after an successful implementation of the rescue package. The best the EU can expect is a reprieve and a stop in speculation against Portugal or other "weak" countries.